Monday, October 22, 2007

Or "words," as the case may be. Take "Subprime crisis forces McMansions to take McBreather," a sad story of the housing horrors of Hinsdale, in which marketing time for properties in the $2MM range is now six to nine months, if you can believe that. (Note to reporters: that's hardly historically unusual for jumbo properties.) What I found amusing is how "subprime," the crisis thing announced in the headline, suddenly gets a set of scare-quotes half-way through the article:

Real-estate businesses are hurting. Uncertainty about the U.S. economy and tighter mortgage financing in the fallout from the "subprime" credit crunch have reduced buyers. . . .

Hanna said one way to view the U.S. property market was to picture it as "a pyramid, where subprime forms the base."

A credit crunch has tightened all mortgage lending because of probes of bankers, lenders and brokers amid the subprime crisis, limiting mid-tier borrowers from buying up.

"Now people at the bottom can't sell to move up a level and that also hurts people at the top of the pyramid," Hanna said.

Lenders are more reluctant to lend to people at the bottom of the market. But wealthier Americans with less-than-perfect credit -- some, for instance, with a hefty mortgage or two already -- are finding themselves in the same boat.

"Many of the people at the high end are CEO's and entrepreneurs who are used to getting what they want," said Bill McNamee, president of Pinnacle Home Mortgage, a mortgage broker focused on Chicago area high-end homes. "They don't like being told 'no,' but some will be forced to get used to it."

Nervousness after the summer's stock market volatility and fear of a recession have also played a role.

"High-end owners are staying put and adding on to their houses because they're afraid of what's happening in the economy," said Sandy Heinlein of Baird & Warner Real Estate in Inverness, a wealthy Chicago suburb.

Many owners are unwilling to risk buying a home for fear they may not be able to sell their existing one, she said.

Pat Turley, owner of Koenig & Strey GMAC Real Estate in the Chicago suburb of Glen Ellyn, said unrealistic expectations from both buyers and sellers have added to the slowdown.

"Some sellers have yet to accept they won't get the price they could have a year or two ago," Turley said. "And while it's a buyer's market, there is a limit to how low buyers can expect sellers to go."

A pyramid. Really? How big do these people think the subprime "starter home" purchase-money market is (or was, even at its height)? Perhaps those sudden queasy quotes around "subprime" involve an implicit recognition that the real "anomaly" in the market is the McMansion owners who perceive themselves as the top of the pyramid, but still want to sell and move up? Um, where are they going to go? Evanston? How wide does the top of a pyramid get?

And we think the problem is that "subprime" borrowers cannot "sell to move up a level"? Odd. I'm hearing that they cannot "sell to avoid foreclosure."

Some day this war is going to end, but until then, we are all subprime now.